Property tax elimination bill tabled

Rep. Jim Cox, R-Berks, primary sponsor of House Bill 1776, addresses hundreds of taxpayers gathered at the State Capitol rally to eliminate school property taxes in Pennsylvania earlier this year. Photo by David Baldinger Jr.

HARRISBURG — In 60 seconds, about 13 hours of committee debate and marathon public discussion ended with a whimper when lawmakers tabled Property Tax Independence Act on Monday.

The House Finance Committee voted 13 to 11 to table House Bill 1776, or the Property Tax Independence Act. Sponsored by Rep. Jim Cox, R-Berks, the bill would eliminate a school district’s ability to levy a property tax, replacing that funding with an increase in sales tax and personal income tax throughout the commonwealth.

The vote to table means that Cox will have to get the committee to vote again, this time for further discussion. Until then, it’s in legislative limbo, and it appears certain that the bill will not pass before the end of the current budget session.

A number of committee members expressed support for the bill, but worried about the logistical and financial implications as written.

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Rep. Eli Evankovich, R- Armstrong, made the motion to table the bill, after indicating he was concerned about “passing a concept out of a committee” with a bill that still posed questions.

Cox said other bills with similar breadth of impact are never passed as written when they leave committee. No legislation, he said, is perfect, and House Bill 1776 is no different.

“The bigger issues we’ve tackled — Marcellus Shale, the Delaware loophole, bills that are just huge in their impact — they came out of committee and what ended up going over to the Senate was vastly different,” Cox said following the vote. Cox was joined by four other Republicans in voting against tabling.

The vote to table did not follow party lines, reflecting a rare nonpartisan response to a tax issue.

Chairwoman Phyllis Munday, D-Luzerne, one of six Democrats against tabling, said she supported the bill despite the fact she found it “deeply flawed” and crafted with “ambiguous language.” The burden of school property taxes and school funding are too big not to be discussed, she said.

“This issue must be resolved and it must be resolved here at the state level, no more passing the buck,” she said. “ forces the discussion forward.”

The gravity of a multi-billion-dollar tax shift required greater deliberation, said Rep. Michael Peifer, R-Monroe. He’d like to hear an expert opinion on the financial analysis.

“I have a difficult time understanding my own little district, but I really have concerns about the overall wellbeing of our commonwealth, and what this drastic change in tax policy will do to the commonwealth in general,” Peifer said.

One sticking point: a gap in how much the state’s Department of Revenue projected the new tax structure would raise compared against what districts would lose by removing property taxes. Department of Revenue projections put collections at $9.1 billion for the bill’s first year of operation, coming from a combination of increased sales revenue, increased personal income tax and expanding sales tax on a goods and services that are not subject to taxation.

Under the current system, property taxes generate some $12.5 billion annually from the state’s 500 school districts.

Much of that gap, Cox said, would be made up by school districts retaining a portion of the property tax to pay outstanding debt until that debt was paid off. Compared to Department of Revenue estimates, it would leave a $900 million funding gap that could be made up with an increase in property taxes, Cox said.

Several representatives pushed for a financial analysis from the Independent Fiscal Office before passage. Cox says he still hopes to get that before the end of session effectively kills the bill.

Chairman Rep. Kerry Benninghoff, R – Centre, said he’s open to have summer sessions to discuss the bill if it’s the will of the membership.

But, as one of the representatives who voted to table the bill, Benninghoff said he was wary of moving along a bill that still raised questions with no answers.

“The longer I sit through these hearings, the more questions I hear raised. It makes me really wonder where people are on the overall context,” Benninghoff said.

Cox said he was disappointed to see the bill stall, and he also pointed out that no members offered up amendments to the bill to make it better shape their concerns. Throughout the committee meeting, he said it was important to use the bill to open a broader discussion about school funding, and to deliver the questions to the leaders.

For the moment, Cox said he’ll still seek out information related to the funding structure and overall tax revenue. The issue is too important to drop.

“I’m not going to let it rest,” Cox said after the vote. “It’s not an issue that I can think can rest on any level. I think we’ve got to continue to move it forward.”